Posts tagged ‘south sudan’

A mining and exploration retrospect for 2012

One of the commodities that excited the 2012 market, graphite began stirring interest in 2011 and really gained momentum early this year. But the precipitous fall, right around April Fool’s Day, let cynics bask in schadenfreude. It was a bubble all along, they insisted.

Well, not quite. Despite reduced share values, work continued as the front-runners advanced their projects and earlier-stage companies competed for position in graphite’s second wave of potential producers. By autumn some of the advanced-stage outfits, far from humbled by last spring’s events, boldly indulged themselves in a blatant bragging contest.

Old king coal to regain its throne

If clean carbon doesn’t excite investors like it used to, plain old dirty carbon might. By 2017 coal’s share of the global energy market will rival that of oil. So says the International Energy Agency, which issued its Medium-Term Coal Market Report in December.

The forecast sees China consuming over half the world’s production by 2017. “Even if Chinese GDP growth were to slow to a 4.6% average over the period, coal demand would still increase both globally and in China,” the report stated. India, with the world’s “largest pocket of energy poverty,” will take second place for consumption.

Coal’s growth in demand is slowing, however. But its share of the energy mix continues to increase even though Europe’s “coal renaissance” (sic) appears to be temporary.

Bringing coal miners to new hassle

Chinese provide much of the market and often the investment. So why shouldn’t they provide the workers too? That seems to be the rationale of Chinese interests behind four British Columbia coal projects.

The proponents plan to use Chinese underground workers exclusively at the most advanced project, HD Mining International’s Murray River, for 30 months of construction and two additional years of mining. Only then would Canadians be initiated into the mysteries of Chinese longwall mining. But with only 10% of the workforce to be replaced by Canadians each year, Chinese “temporary” workers would staff the mine until about 2026. The B.C. government has known about these intentions since at least 2007.

The HD Mining saga has seen new developments almost every week since the United Steelworkers broke the story on October 9.

Resource imperialism aside, resource nationalism and other aspects of country risk continued throughout 2012. South American Silver TSX:SAC continues to seek compensation after spending over $16 million on a silver-polymetallic project that the Bolivian government then snatched as a freebie. Centerra Gold TSX:CG escaped nationalization in Kyrgyzstan but works its way through somewhat Byzantine political and regulatory intrigue, as does Stans Energy TSXV:HRE. In November the latter claimed a court victory over a hostile parliamentary committee.

That, despite the fact Barrick produces far more gold, with guidance of 7.3 million to 7.5 million ounces this year, compared to Goldcorp’s 2.35 million to 2.45 million ounces. Newmont, the world’s second-largest gold producer, expects to come in “at the low end” of its projected 5 million to 5.1 million ounces.

“It’s not necessarily that Goldcorp is doing so well, it’s just that Barrick is doing so poorly,” Reuters quoted John Ing, Maison Placements Canada president and mining analyst. The news agency noted that Barrick shares fell nearly 25% so far this year, while Goldcorp weathered the storms with a mere 3.5% drop.

In a Friday Bloomberg article, one of Barrick’s fired CEOs pointed out the proportionately greater potential of smaller companies. “You’ve got no growth in total in the industry and a lot of your mines are aging and closing down, so you have to work very hard just to stay even,” Randall Oliphant told the news agency. Now executive chairman of New Gold TSX:NGD, Oliphant was Barrick’s CEO from 1999 to 2003. He told Bloomberg that once a company’s producing more than two million ounces a year, shareholders’ growth expectations are hard to meet.

Bloomberg’s index of 20 mid-tier gold miners “rose 1.3% in the past three years through [Thursday], compared with a 19% decline in a gauge of 14 seniors. In the same period, New Gold has climbed 154% in Toronto, while Barrick slumped 18%,” the agency reported.

Craig West, an analyst with GMP Securities, told Bloomberg, “Barrick isn’t going to grow by 50% in the next three years. I can name eight different juniors that will, so why buy the seniors?”

The juniors West referred to might have been mid-caps like New Gold, which closed Friday with 462.55 million shares outstanding at $10.74 for a market cap of $4.97 billion. But some micro-caps don’t do too badly. On Monday Brixton Metals’ TSXV:BBB share price rose 33%, from $0.15 to $0.20, on news from its Thorn silver-gold-polymetallic project in British Columbia. The $13.55-million-market-cap company closed Friday at $0.215, with 63.03 million shares outstanding.

By Wednesday’s close, Barrick’s market cap was back on top. The giant closed Friday with a billion shares outstanding at $36.06 for a market cap of $36.08 billion. On October 31 Barrick announced a quarterly dividend of $0.20.

Goldcorp closed the week with 811.21 million shares at $44.24 for a market cap of $35.89 billion. Goldcorp announced a monthly dividend on November 5 of $0.045.

Friday’s closing bell found Newmont with 491.54 million shares at $48.07 for a $23.63-billion market cap. On October 31 the company announced a quarterly dividend of $0.35.

Cow Mountain no bull, says Barkerville

Still under a Cease Trade Order imposed last August, Barkerville Gold Mines TSXV:BGM intends to release a revised resource estimate later this month, Business in Vancouver reported on Tuesday. The CTO remains in effect until the company’s Cow Mountain resource estimate meets the B.C. Securities Commission’s satisfaction.

Last June Barkerville shocked and awed the market with an indicated resource of 69 million tons (not tonnes) grading an average 5.28 g/t gold for 10.63 million gold ounces.

On June 28 close, Barkerville’s stock sat at $0.81. The following day, when the Cow resource was announced, Barkerville opened at $1.35 and closed at $1.21. That evening the company announced “incentive stock options to certain directors, officers, employees and consultants of the company to purchase up to an aggregate of 634,980 common shares” at $1.21 a share. The next trading day, July 3, the stock hit a 52-week high of $1.67. On the August 13 CTO it closed at $1.22.

Investor enthusiasm aside, some observers were skeptical, even derisive of the resource estimate. “Hilarious” was the Northern Miner’s response.

Barkerville’s June 29 press release also suggested a non-43-101 “total geological potential” for the Island Mountain/Cow Mountain/Barkerville Mountain trend of 405 million to 684 million tons with an average grade between 4.11 g/t and 5.49 g/t for 65 million to 90 million gold ounces. Those numbers, the company stressed, were potential “and it is uncertain if further exploration will result in the delineation of mineral resources.”

Referring to the 43-101 resource estimate, Barkerville president/CEO Frank Callaghan told BIV, “We’re really confident in the numbers. We support the guy that’s done the work and we’re not prepared to throw him under the bus. He’s done a good job.”

The company has been twinning holes and drilling deeper, and has contracted Snowden Mining Industry Consultants to oversee the new 43-101. As a result it should be “very, very comprehensive to a point where a 10-year-old is going to be able to read it and understand it,” Callaghan told BIV.

The story quoted Northern Securities mining analyst Matthew Zylstra, who said that Snowden “adds some credibility. So whatever they come out with, I think this is going to be viewed a lot more positively.”

But he added, “I think they’re going to use a lot more strict criteria, so my feeling is that they won’t come out with the same kind of numbers that [the previous QP] Peter George did.”

Sub-Saharan Klondike

Where better to find an elephant country than in elephant country? Except for oil, South Sudan’s underground riches have long been neglected. But, according to a Friday Reuters dispatch, artisanal miners talk of finding the occasional nugget grading 200 grams or more. Now foreign companies are lining up in anticipation of new mining legislation scheduled to pass later this month. It’s expected to spark a licensing and exploration rush for several minerals.

“Nobody knows the extent of South Sudan’s mineral reserves because the 22-year war prevented exploration,” Reuters stated. “The latest geological surveys date back to the 1970s and ‘80s, but mining officials say diamond and gold deposits in South Sudan’s mineral-rich neighbours are encouraging. They describe the 16-month-old country as virgin territory.” South Sudan split from Sudan last year.

The news agency noted the trials of working “in a landlocked country with just 300 kilometres of paved road.” As government adviser Rainer Hengstmann told Reuters, “You need a railway if you want to go large-scale. It will take time. They really need roads and power.”

In the meantime artisanal miners prevail. Reuters described dozens of “Toposa tribesmen and women, festooned with plastic necklaces, brass piercings and beaded amulets, hack[ing] away at the red soil with metal poles and shovels, digging small craters in a boozy revelry.”